United States v. Aleynikov
676 F.3d 71 (2012)
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Rule of Law:
The National Stolen Property Act (NSPA) does not apply to the theft of purely intangible property, as it requires the physical taking of a tangible 'good, ware, or merchandise.' The Economic Espionage Act's (EEA) prohibition on stealing trade secrets related to a product 'produced for or placed in' commerce does not cover products developed and used solely for a company's internal operations and not intended for sale or distribution.
Facts:
- Sergey Aleynikov was a computer programmer for Goldman Sachs & Co. ('Goldman'), developing proprietary source code for the company's high-frequency trading (HFT) system.
- Aleynikov was bound by Goldman's confidentiality policies, which barred him from taking or using proprietary information after his employment ended.
- In April 2009, Aleynikov accepted a high-paying position at Teza Technologies LLC, a startup competitor seeking to develop its own HFT system.
- On his last day at Goldman, June 5, 2009, Aleynikov encrypted and uploaded over 500,000 lines of Goldman's HFT source code to a server in Germany.
- After uploading the code, Aleynikov deleted the encryption program and his computer command history.
- From his home in New Jersey, Aleynikov downloaded the source code from the German server to his personal computer and other devices.
- On July 2, 2009, Aleynikov traveled to Chicago for meetings at Teza, bringing with him a flash drive and laptop containing portions of the stolen Goldman source code.
- He was arrested by the FBI upon his return to New Jersey on July 3, 2009.
Procedural Posture:
- Sergey Aleynikov was indicted in the U.S. District Court for the Southern District of New York on three counts, including violations of the Economic Espionage Act (EEA) and the National Stolen Property Act (NSPA).
- Aleynikov filed a motion to dismiss the indictment for failure to state an offense.
- The district court (a trial court) dismissed one count but denied the motion to dismiss the EEA and NSPA counts.
- A jury convicted Aleynikov on the remaining two counts.
- The district court sentenced Aleynikov to 97 months of imprisonment and a fine.
- Aleynikov (appellant) appealed his conviction and sentence to the U.S. Court of Appeals for the Second Circuit, challenging the sufficiency of the indictment. The United States was the appellee.
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Issue:
Does the electronic theft and interstate transmission of a company's proprietary source code violate the National Stolen Property Act's prohibition against transporting stolen 'goods, wares, or merchandise' and the Economic Espionage Act's prohibition against stealing a trade secret related to a 'product produced for or placed in interstate commerce' when the source code is purely intangible and the system it belongs to is used internally and not sold?
Opinions:
Majority - Chief Judge Jacobs
No. Aleynikov's conduct did not violate either the National Stolen Property Act or the Economic Espionage Act. The NSPA requires the theft of physical 'goods, wares, or merchandise' and does not extend to the theft of purely intangible property. Citing the Supreme Court's decision in Dowling v. United States, the court held that the NSPA contemplates a physical identity between the items unlawfully obtained and those eventually transported. Aleynikov did not physically take any tangible item from Goldman; he merely copied and transmitted intangible information. The later storage of this intangible code on a tangible medium like a flash drive does not transform the nature of the initial theft. Regarding the EEA, the court found that Goldman's HFT system was not a 'product that is produced for or placed in interstate or foreign commerce.' The statute's language distinguishes between products 'placed in' commerce (already on the market) and those 'produced for' commerce (intended for the market, like prototypes). Since Goldman's HFT system was for internal use only and was never intended to be sold or licensed, it did not fall into either category. To interpret 'produced for' commerce as broadly as the government suggested would render the phrase 'placed in' commerce superfluous, violating established canons of statutory construction.
Concurring - Judge Calabresi
No. The majority's textual analysis is correct, but it is important to consider the 'mischief' the law was enacted to address. It is hard to conclude that Congress did not intend for the EEA to cover the kind of behavior in which Aleynikov engaged, especially since the EEA was passed after courts, including the Supreme Court in Dowling, had ruled that the NSPA did not cover intellectual property theft. However, because criminal statutes must be read narrowly and ambiguity resolved in favor of the defendant (the rule of lenity), the court is constrained to reverse the conviction. This concurrence expresses the hope that Congress will amend the statute to clarify its intent and criminalize such conduct in the future.
Analysis:
This decision highlighted a significant gap in federal criminal law concerning the theft of purely digital information. By narrowly interpreting the NSPA and EEA, the court demonstrated judicial restraint, refusing to 'stretch or update' statutory language to fit modern technological crimes and instead placing the burden on Congress to legislate. The ruling directly spurred legislative action, leading to the Theft of Trade Secrets Clarification Act of 2012, which amended the EEA to cover products and services used in, as well as placed in, commerce. The case serves as a key example of the rule of lenity and the challenges of applying pre-digital era statutes to 21st-century offenses.
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